How to get a loan with no credit rating ?
Discussion
My son's GF is in need of a loan so she can purchase a car. She is 18, rents her own property and is in full time employment and requires a newer car as her current one has just had a GH faliure and will cost more to repair than it's worth.
She has seen a car she wants but in trying to finalise the finances through a loan she finds out that she has no credit score due to her age and cannot get a loan through her bank.
What other options would be open to her?
Any advice much appreciated.
She has seen a car she wants but in trying to finalise the finances through a loan she finds out that she has no credit score due to her age and cannot get a loan through her bank.
What other options would be open to her?
Any advice much appreciated.
You misunderstand my post. It's notbing to do with affordability as you say it's about risk as their is no credit history.
If you have the loan countersigned by a guarantor who does have a good credit history then the risk is reduced as if the original person defaults the guarantor is responsible for the loan
If you have the loan countersigned by a guarantor who does have a good credit history then the risk is reduced as if the original person defaults the guarantor is responsible for the loan
With regards to insurance for an 18 year old you are actually better staying away from common cars like teh Fiesta, Saxo etc... as these are seen as a high risk because lots of young people crash the. Better to try something a bit off the wall that a normal teenager doesn't drive so risk is seen as less, based on historical data
LexSid said:
There seems to be a few garages now that are offering a kind of pay as you go finance which they say caters for poor credit. One is tradepricecars in Essex, used to be Frankie and alfies. Another is called lease2buy which is based in Scotland. Seem to have a good choice.
But the interest rates are ridiculously highBeing 18 and having no credit history means she is a very high risk and no underwriter is going to give her a loan at a competative rate without a guarantor I'm afraid.
The car may be a 'write off' from a repair point of view, but if it was repaired and ran for another year surely that would be worth it?
If it's a lemon and a money pit then scrap/sell and buy a shed, run it for a year.
In this year she can save/start building a credit rating. She can get a phone contract in her name, make sure her bank account is registered to her current address, get herself on the voters roll, get a 'credit builder' credit card and pay in full each month. If she's paying gas/electric then switch to monthly direct debit, after a year of this she will actually have a credit history from multiple sources and will be a lower risk.
Getting finance for a car at 18 is not a good idea IMHO, in my experience 18 year olds are not very finacially responsible. Also, what she might consider affordable will be completely different from what underwriters view as affordable.
The car may be a 'write off' from a repair point of view, but if it was repaired and ran for another year surely that would be worth it?
If it's a lemon and a money pit then scrap/sell and buy a shed, run it for a year.
In this year she can save/start building a credit rating. She can get a phone contract in her name, make sure her bank account is registered to her current address, get herself on the voters roll, get a 'credit builder' credit card and pay in full each month. If she's paying gas/electric then switch to monthly direct debit, after a year of this she will actually have a credit history from multiple sources and will be a lower risk.
Getting finance for a car at 18 is not a good idea IMHO, in my experience 18 year olds are not very finacially responsible. Also, what she might consider affordable will be completely different from what underwriters view as affordable.
OlberJ said:
How does it credit build though, do you score points for paying off in full every month?
Even if it's just a small amount?
It's marketing guff to capture the market who can't get credit because they have no record. By virtue of having a credit card they can then 'build' their credit score until such point as they qualify for a normal credit card. Or, fEven if it's just a small amount?
k it all up and go down the proper adverse credit route.nosittap said:
Being 18 and having no credit history means she is a very high risk and no underwriter is going to give her a loan at a competative rate without a guarantor I'm afraid.
The car may be a 'write off' from a repair point of view, but if it was repaired and ran for another year surely that would be worth it?
If it's a lemon and a money pit then scrap/sell and buy a shed, run it for a year.
In this year she can save/start building a credit rating. She can get a phone contract in her name, make sure her bank account is registered to her current address, get herself on the voters roll, get a 'credit builder' credit card and pay in full each month. If she's paying gas/electric then switch to monthly direct debit, after a year of this she will actually have a credit history from multiple sources and will be a lower risk.
Getting finance for a car at 18 is not a good idea IMHO, in my experience 18 year olds are not very finacially responsible. Also, what she might consider affordable will be completely different from what underwriters view as affordable.
She has a mobile phone on contract, she pays her electric on Direct Debit, her bank acc is registered to her current address, but does not want to have a credit card.The car may be a 'write off' from a repair point of view, but if it was repaired and ran for another year surely that would be worth it?
If it's a lemon and a money pit then scrap/sell and buy a shed, run it for a year.
In this year she can save/start building a credit rating. She can get a phone contract in her name, make sure her bank account is registered to her current address, get herself on the voters roll, get a 'credit builder' credit card and pay in full each month. If she's paying gas/electric then switch to monthly direct debit, after a year of this she will actually have a credit history from multiple sources and will be a lower risk.
Getting finance for a car at 18 is not a good idea IMHO, in my experience 18 year olds are not very finacially responsible. Also, what she might consider affordable will be completely different from what underwriters view as affordable.
What we have come up with is a personal loan, via "the Bank of Monkey Boy". She can pay off what she was going to do in 12 months less time that that originally quoted by her bank. She gets the car she wants, I make some money out of it, she is happy and we have a contract laid out.
Monkey boy 1 said:
but does not want to have a credit card.
SensibleMonkey boy 1 said:
What we have come up with is a personal loan, via "the Bank of Monkey Boy". She can pay off what she was going to do in 12 months less time that that originally quoted by her bank. She gets the car she wants, I make some money out of it, she is happy and we have a contract laid out.
You're a braver man than me, hope it works out well for all parties. OlberJ said:
How does it credit build though, do you score points for paying off in full every month?
Even if it's just a small amount?
There is no such thing as a credit score in this context, so you don't get points. Your credit file is just a record of your credit history which lenders look at to calculate how risky you are to lend to based on your track record. Even if it's just a small amount?
To get a good track record and a good payment history you have to actually borrow money, a 'credit builder' credit card usually have a low limit (£200) and high APR (40%), just by doing the weekly shop using it and paying in full at the end of the month will 'build' a good payment history, you don't have to pay interest if you pay in full each month also.
It does not have to be credit cards, any form of borrowing will do, mobile phone contracts (you're basically buying the phone on finance) help, when you switch your utilities to direct debit these days it's usually reported on your credit file, this doesn't apply to all providers though.
I'd stay clear of payday loans though, they are like a big red flag warning flag and are negatively view upon, in regards to your 'credit score'.
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